Talking to Kids About Money

A very common phrase many financial planners hear from their clients is, “My parents never talked to me about money.” That’s because our society isn’t comfortable talking about money in anything but the vaguest terms. The most specific someone might get is to say that something is “very expensive” or they “got a really good deal.”

The trouble with this is that our kids learn so much about the world through seeing how we handle things. We actively teach them important life lessons – how to eat healthy, that we should be kind and respectful of other people, that exercising our bodies is important – through the things we say and do. We don’t do this with money nearly as well.

Money is an important part of every adult’s life. It’s the main reason most of us go to work every day and we have to make financial decisions all the time. If our kids are going to grow up to be functional adults, they need a healthy relationship with money. We’re not doing them any favors by hiding money behind closed doors or treating it as a shameful secret.

Generally, the most financially literate adults are the ones whose parents taught them financial lessons growing up, whether explicitly or not. I don’t recall my parents ever giving me specific advice about how to handle money, but I could see that they were always very careful about their spending. I remember my dad sitting at the kitchen table with a pile of receipts and the handwritten ledger sheet where he recorded their spending every month. People who grow up in a different kind of household – one where money went out the door as soon as it came in or where debt was a constant source of stress – are shaped by that as well. Many times they adopt the same habits as their parents; although some of them do make an active decision to live a different lifestyle. It’s hard to break out of that cycle, though, when you haven’t seen healthy money habits demonstrated. Maybe they don’t want to be constantly in debt as their parents were, but they also weren’t given the tools to take a different path.

My husband and I talk about money all the time with our own four kids. We don’t say “we can’t afford that” when we make a decision against spending money; rather we say “we’re choosing not to spend our money on that.” It’s much more reflective of the reality that we’re making a conscious and purposeful choice rather than being controlled by how much money happens to be in our wallet.

We talk with our kids about the big things. They understand that we pay money to live in our house and that we’ll eventually own it and not have to pay anymore. They know that college is very expensive and that we’re already saving our money for it. When the college search actually begins in a few years, they will be active participants in picking a college that not only works for them socially and academically, but is also affordable for our family. If they have to take out student loans, they will understand ahead of time what that will mean for them after graduation.

We also talk about every day financial decisions. If they go to the grocery store with me they hear me talk about why I decided on one brand versus another or when I’m willing to pay a little bit more for wild fish instead of farm-raised. They know I buy seltzer in cans instead of bottles because it’s cheaper per ounce, but I can’t even consider buying the cheaper, off-brand English muffins, or I get a lot of complaints.

I remember the first time my oldest brought home a book order form from school. He had circled everything he wanted – which pretty much meant that more items were circled than not. I got the calculator and we added up how much it would cost to purchase everything he wanted. It added up to over $200. He didn’t understand exactly how much money that was, but it sounded like a lot to his kindergarten brain. I had him go back through and take out some items he didn’t really want as badly or books we knew we could borrow for free from the library. When he came back to me, we added it up again: $80. It took three or four passes before he got it down to under $20. I never intended that book order to be an active lesson in financial literacy, but it turned out to be a pretty good way to teach him about making choices. Now when he brings home a book order, he has two or three items circled and he knows exactly how much they add up to before he gives me the form. The real value of this lesson is not that I’ve saved a few hundred dollars a year or that I don’t have to fight with him about things he doesn’t really need, but that he’s aware that we think about the choices we make around money and we use our money to buy things that will make our lives better in some way.

I also find that gift cards are great tools for teaching how to make decisions about money. Once a year, a generous friend of the family sends Target gift cards to my kids. This is a serious event for our family and one we set aside an entire afternoon for. I encourage them to think ahead of time about what they want to buy and to consider items other than toys: sporting equipment or clothes or decorations for their rooms. They all approach our shopping trip very differently. Two of them spend every dollar on the card, while the other two only buy a couple of things they want and save the rest. Three of them spend a lot of time weighing the available options, while the other one just grabs everything she sees that looks good. They can bring their own money to supplement the gift card, but they know I won’t be giving money to them if they go over.

Talking easily and openly about money at home is giving your children a gift. You don’t have to tell them exactly how much you make nor share with them anything that might cause them stress, like knowing you’re carrying around a lot of debt, but consider starting conversations about those little, every-day decisions about money and why you’re making the choices you are. If you’ve made a smart money choice, tell them about it and if you’ve made mistakes in the past, share those too. You don’t have to be a financial genius to have learned some smart lessons over the years. Let your children learn from your mistakes so that hopefully they won’t repeat them. Our kids don’t have a lot of ways to learn about money, so engaging them in active conversations about money choices will allow you to shape the lessons they’re learning and make sure they’re taking away the right messages.

Allison V. Bishop, CPA, is a personal finance coach in Portland, Maine with 19 years experience as a CPA. She seeks to help her clients make conscious decisions around their money in order to reach their financial goals. Her website is:allisonbishop.com.